OPEC aims at full compliance with quota
The Organization of Petroleum Exporting Countries, noting signs of market strengthening, agreed in a Mar. 15 meeting in Vienna to seek full compliance with a quota cut announced in December.
By OGJ editors
HOUSTON, Mar. 16 -- The Organization of Petroleum Exporting Countries, noting signs of market strengthening, agreed in a Mar. 15 meeting in Vienna to seek full compliance with a quota cut announced in December.
The exporters' group had been expected to focus on compliance with the earlier target rather than adjust the quota again (OGJ Online, Mar. 11, 2009).
The group said "secondary sources" had reported 79% compliance in February with the December decision, which in conjunction with an earlier quota adjustment was to have reduced output by 4.2 million b/d to 24.85 million b/d.
It said that level of compliance with production targets "has contributed to balancing the price of the OPEC reference basket at around $40/bbl since the beginning of the year, despite the critical economic outlook."
It cited forecasts that the global economy will contract by 0.2% this year, bringing annual average oil demand down by 1 million b/d to 84.6 million b/d.
OPEC expects supply from outside its membership to grow by 400,000 b/d this year to 50.7 million b/d. That balance would lower the requirement for OPEC crude oil production by 1.8 million b/d to 29.1 million b/d in 2009.
The group noted "some initial signs reported of a reversal in crude oil stock trends and a narrowing of the contango in the front price structure." In a contango market, forward prices exceed those of crude for immediate delivery.
OPEC's expectation of an increase in non-OPEC supply differs from the view of the International Energy Agency (OGJ Online, Mar. 13, 2009). In its March Oil Market Report IEA projected non-OPEC supply at 50.6 million b/d, unchanged from 2008.
IEA's projections, which include average annual oil demand of 84.4 million b/d, imply a need for OPEC crude oil, with no stock change, of 28.8 million b/d.
A third major source of market data, the US Energy Information Administration, this month forecast global oil demand at 84.27 million b/d, down 1.38 million b/d from 2008, and non-OPEC production at 49.76 million b/d, up 10,000 b/d (OGJ, Mar. 16, 2009, p. 36).